THESIS NAVAL POSTGRADUATE SCHOOL. Monterey, California AD-A j q1c ARBITRARY BUDGET CUTS AND THE U.S. NATIONAL SECURITY POSTURE

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1 AD-A NAVAL POSTGRADUATE SCHOOL Monterey, California,, 0&7"G R A D13 THESIS ARBITRARY BUDGET CUTS AND THE U.S. NATIONAL SECURITY POSTURE by LCDR Clyde J. McCaleb III December, 1990 Thesis Advisor: Second Reader: Dr. Robert E. Looney Dr. Patrick J. Parker Approved for public release; distribution is unlimited j q1c

2 UNCLASSIFIED SECURITY CLASSIFICATION OF THIS PAGE REPORT DOCUMENTATION PAGE 1 a. REPORT SECURITY CLASSIFICATION 1 b RESTRICTIVE MARKINGS UNCLASSIFIED 2a. SECURITY CLASSIFICATION AUTHORITY 3 DISTRIBUTION/AVAILABILITY OF REPORT 2b. DECLASSIFICATION/DOWNGRADING SCHEDULE Approved for public release; distribution is unlimited. 4. PERFORMING ORGANIZATION REPORT NUMBER(S) 5 MONITORING ORGANIZATION REPORT NUMBER(S) 6a. NAME OF PERFORMING ORGANIZATION 6b. OFFICE SYMBOL 7a NAME OF MONITORING ORGANIZATION Naval Postgraduate School (If applicable) Naval Postgraduate School 56 6c. ADDRESS (City, State, and ZIP Code) 7b ADDRESS (City, State, andzip Code) Monterey, CA Monterey, CA a. NAME OF FUNDING/SPONSORING 8b. OFFICE SYMBOL 9 PROCUREMENT INSTRUMENT IDENTIFICATION NUMBER ORGANIZATION (If applicable) Bc ADDRESS (City, State, andzip Code) 10 SOURCE OF FUNDING NUMBERS Program Element No Project No lasx No Work Unit Accession I Numoe, I 11 TITLE (Include Security Classification) ARBITRARY BUDGET CUTS AND THE U.S. NATIONAL SF1'URiTY POSTURE 12 PERSONAL AUTHOR(S) McCaleb, Clyde J. III 1 3a TYPE OF REPORT 1 3b. TIME COVERED 14 DATE OF REPORT (year, month, day) 15 PAGE COUNT Master's Thesis From To DECEMBER SUPPLEMENTARY NOTATION The views expressed in this thesis are those of the author and do not reflect the official policy or position of the Department of Defense o, the U.S. Government. 17 COSATI CODES 18 SUBJECT TERMS (continue on reverse if necessary and identify by block number) FIELD GROUP SUBGROUP U.S. Budget Process, U.S. National Security, Needed Changes to the U.S. Budget Process, 19 ABSTRACT (continue on reverse if necessary and identify by block number) PPBS, Long-Range Defense Strategy, Industrial Base, The Federal Deficit, Gramm-Rudman- Hollings, Stabilization of Defense Spending This thesis examines the problems confronting the decision- makers today as they are lorced to make tough budgetary decisions affecting the U.S. national security posture. Due to the dramatic changes occurring throughout the world, particularly in Eastern Europe and the Soviet Union, there is growing pressure upon Congress to reduce defense expendit ares and realize a 'peace dividend.' The danger to U.S. national security lies not within the cuts themselves, but rather, within arbitrary budget cuts implemented to appease the American public and realize a quick 'peace dividend.' Both the executive and legislative branches of government must consider the impact of current changes in defense spending on the long-range U.S. defense posture. This first requires a consensus between both branches of government on exactly what the future U.S. defense strategy should be, a dilemma made more difficult due to their political differences. The planning methods used by the Office of Management and Budget and the Department of Defense must become more realistic, and the budgetary perspective and practice of Congress,kust become more long-range in scope. The U.S. must learn to operate more efficiently with less resources, while maintaining an adequate U.S. national security posture. 20 DISTRIBUTION/AVAILABILITY OF ABSTRACT 21 ABSTRACT SECURITY CLASSIFICATION 19UNCLASSIFIEDOUNLIMITE r3 SAME ASREPOR: Q DTIC USERS UNCLASSIFIED 22a NAME OF RESPONSIBLE INDIVIDUAL 22b TELEPHONE (Include Area code) 22c OFFICE SYMBOL Dr. Robert E. Looney 11408) iLX DD FORM 1473,84 MAR 83 APR edition may be used until exhausted SECURITY CLASSIFICATION OF THIS PAGE All other editions are obsolete UNCLASSIFIED

3 Approved for public release; distribution is unlimited. Arbitrary Budget Cuts and the U.S. National Security Posture by Clyde J. McCaleb III Lieutenant Commander, United States Navy B.S., University of North Alabama Submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN NATIONAL SECURITY AFFAIRS from the NAVAL POSTGRADUATE SCHOOL December 1990 Author: LCD Clyde J. McCaleb III Approved by: i_ I.. Dr. Robert E. Looney, Thesis Advisor 4. Patrick J. Parker, Second Reader Dr. Thomas Bruneau, Chairman Department of National Security Affairs ii

4 ABSTRACT This thesis examines the problems confronting the decision-makers today as they are forced to.2ke tough budgetary decisions affecting the U.S. national security posture. Due to the dramatic changes occurring throughout the world, particularly in Eastern Europe and the Soviet '-nrl,. there is growing pressure upon Congress to reduce defense expenditures and realize a "peace dividend." The danger to U.S. national security lies not within the cuts themselves, but rather, within arbitrary budget cuts implemented to appease the American public and realize a quick "peace dividend." Both the executive and legislative branches of government must consider the impact of current changes in defense spending on the lo;±grange U.S. defense posture. This first requires a consensus between both branches of government on exactly what the future U.S. defense stategy should be, a dilemma made more difficult due to their political differences. The planning methods used by the Office of Management and Budget and the Department of Defense must become more realistic, and the budgetary perspective and practice of Congress must become more long-range in scope. The U.S. must learn to operate more efficiently with less resources, while maintaining an adequate U.S. national security posture. C l r -0,. iii 1 :', jlnmw\ I

5 TABLE OF CONTENTS I. INTRODUCTION A. A BRIEF INTRODUCTION TO THE CURRENT BUDGET PROCESS The Budget: To Whom Does The Responsibility Belong? Civilian Control Over Defense B. THE FUTURE INTERNATIONAL ENVIRONMENT C. THE FUTURE THREAT TO U.S. NATIONAL SECURITY ASSOCIATED WITH THE BUDGET-MAKING PROCESS.. 20 II. THE PROBLEMS ASSOCIATED WITH THE CURRENT BUDGET PROCESS A. THE POLITICAL PRESSURE TO REDUCE DEFENSE SPENDING The Soviet Threat The Need for a New Threat to U.S. Interests Is There Too Much Concern Over Reducing the Deficit? B. THE NEED FOR A VIABLE LONG-RANGE DEFENSE STRATEGY C. THE NEGLECTED INDUSTRIAL BASE iv

6 D. THE THREAT TO THE U.S.' TECHNOLOGICAL SUPERIORITY The Importance of Continued Research and Development The Threat to the U.S.' Lead in Aerospace Technology Other Considerations III.REFURBISHMENT OF THE SYSTEM A. THE DEPARTMENT OF DEFENSE Fraud, Waste, and Abuse Declarative Policy and Defense Capabilities Congress in the PPBS Process B. THE EXECUTIVE BPANCH More Realistic Economic Planning Assumptions Better Cooperative Planning Between DoD and OMB C. THE U.S. CONGRESS Cooperation with the Executive Branch. 92 a. The Federal Deficit b. The Gramm-Rudman-Hollings Legislation "Macro" vice "Micro" Management of the Budget Stabilization of Defense Spending Stabilization of Procurement Numbers v

7 IV. CONCLUSION SELECTED BIBLIOGRAPHY INITIAL DISTRIBUTION LIST vi

8 LIST OF TABLES I. BUDGET PROCESS TIMETABLE...27 II. ECONOMIC FORECASTERS' RANKINGS, III.DEFENSE BUDGET TRENDS IV. COSTS OF PRODUCTION STRETCHOUTS vii

9 LIST OF FIGURES 1. CLAIMS ON FUTURE RESOURCES THE DIFFICULTIES WITH DEMOCRATIC GROUP DECISIONS HIGH PRIORITY THREATS U.S. AND SOVIET BUDGET DEFICITS: DEFENSE SPENDING AS A PERCENTAGE OF GNP IN THE DOD BIENNIAL PLANNING, PROGRAMMING AND BUDGETING SYSTEM U.S. MILITARY SPENDING TOP 10 U.S. DEFENSE CONTRACTORS' DEPENDENCE ON THE PENTAGON NORTHROP'S DEPENDENCE ON THE B FY 1991 PRESIDENT'S BUDGET ECONOMIC ASSUMPTIONS DEFENSE-MILITARY BUDGET PLANS FORTY FIVE-YEAR DEFENSE BUDGET TREND THE FEDERAL FUNDS DEFICIT AND THE SOCIAL SECURITY & OTHER TRUST FUND SURPLUSES v iii

10 14. GRAMM-RUDMAN-HOLLINGS DEFICIT TARGETS AMENDMENT POINTS IN THE DEFENSE BUDGET PROCESS U.S. MILITARY SPENDING U.S. MILITARY SPENDING TREND ix

11 I. INTRODUCTION The following chapters will examine the problems associated with the current budget process, and outline specific proposals which are important for improving the current system. The study begins with a brief introduction into the current budget process, an examination of the future international environment, and the threats to U.S. national security associated with tne budget-making process. Chapter two will address specific problems with the current budget process that affects the U.S. national security posture, and chapter three will outline specific corrective action for those problems. All of the problems which will be discussed are not, in the slightest degree, expected to be abolished over night. Likewise, the corrective concepts proposed are not expected to be easily implemented. In fact, because of the indigenous divergence of opinions present in a pluralistic democracy such as ours, it tends to be more difficult for the political leadership to attain a consensus on problems, such as what must be done to improve the budget process, or implement measures to correct deficiencies in its own process. This point was so vividly epitomized during the budget negotiations at the end of FY-90, when Congressional leaders were forced to try to reach an agreement on a plan to cut the

12 federal deficit prior to October ist, at which time mandatory Gramm-Rudman-Hollings (G-R-H) cuts were to take effect. Even though the leadership of Congress reached an agreement with the executive branch, the full conqressional membership still rejected the proposal. The necessary changes will be difficult to implement, however, the importance of the need for change has already become very apparent to the political leadership and the American public. America's patience with fickle governmental policy and process is deteriorating. Changes must be made within government, either through procedural adjustments or simply a more personal awareness, and therefore, modification of behavior, by members of Congress. Hopefully, some small contribution toward improving the system may be realized through the efforts of this paper. A. A BRIEF INTRODUCTION TO THE CURRENT BUDGET PROCESS 1. The Budget: To Whom Does The Responsibility Belong? There is nothing more fundamental to the power of the legislative branch than the concept of the "power of the purse." It is the essence of strength from which the Congress has operated since the U.S. Constitution was placed in power. It takes money to function in society, and governmental matters are no different. Congress was granted the "power of the purse" in Article I, Section 8, of the U.S. Constitution as stated, "To 2

13 lay and collect taxes, duties, imposts, and excises, tc pay the debts and provide for the common defense and general welfare of the United States." ' The founding fathers gave the House of Representatives predominant control over federal spending primarily because they better represented the populace. James Madison, in defending the system in The Federalist, No. 58, argued that: this power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people. 2 By regulation and allocation of governmental spending through the budgetary process Congress has enormous power over the governmental system. There are a number of citizens within the mass public who believe the government operates with an unlimited supply of money. These people are unaware of the very real budget by which the government operates, and become disturbed when there is talk of possible program cutbacks which may affect their livelihood. Nothing will arouse the mass public's fury faster than speculation of possible cutbacks in Medicare, Social Security, employment opportunity, or other programs that may affect their pocketbook. The elected representatives 1 The Constitution of the United States. 2 Quoted in W. Thomas Wander, F. Ted Hebert, and Gary W. Copeland, Congressional Budgeting: Politics, Process, and Power (Baltimore, Maryland: The John Hopkins University Press, 1984), pp

14 in Washington know the special interest groups will ensure they receive word of such cuts as quickly as possible. Herein lies the volatility of the budgetary process as it concerns the civilian sector. This point must be understood and kept in mind when discussing the budget's affect on defense structure and policy, especially when it impacts civilian programs. The U.S. Government became much more involved in the country's economy with the enactment of the Full Employment Act of This legislation institutionalized the Roosevelt administration's "New Deal." Basically the legislation stated the government has a responsibility to strive to maintain full employment. It was assumed the government could influence the economy in one of three ways to achieve this goal: (1) control over the interest rates; (2) manipulation of taxation; and (3) regulation of governmental spending. It was believed these j three tools would allow the government to control the publics propensity to save and invest. Two organizations were formed to assist in the task. T.ie first was the Council of Economic Advisors which was formed to monitor the economy and brief the President on the status of employment. The other was the Joint Economic Committee of the Congress which was designed to investigate the economy in a micro-economic view. This legislation placed even more pressure on the legislative and executive branches by placing the responsibility for employment in their hands. 4

15 The most recent major reform of the budgetary process was the Congressional Budget Act of Due to the immense power granted Congress with respect to budgetary matters, it is understandable that tensions might surface from time to time as a result of the allocation of resources. These tensions surface most frequently between the executive and legislative branches of government. Prior to 1974, only five periods of major reform to the congressional budget process can be identified: the creation of the appropriations committees after the Civil War; " the dispersal of the appropriations power in the House between 1877 and 1885; * the dispersal of the appropriations power in the Senate in 1899; * the consolidation of the appropriations power in the House (1920) and the Senate (1922); " the creation of the legislative budget and the Joint Budget Committee in The fact there have been so few major reforms over the years indicates the strength of the budgetary system, but also that tensions in the system have been resolved primarily through minor adjustments vice major reforms. 3 W. Thomas Wander, F. Ted Hebert, and Gary W. Copeland, ConQressional BudQeting: Politics, Process, and Power (Baltimore, Maryland: The John Hopkins University Press, 1984), 3&4. 5

16 To understand the necessity for reform in 1974 one must examine the economy between World War II and the early 1970's. Without an examination of specific details, let us suffice to say the U.S. economy, with the exception of the mid 1960's, was confronted with growing fiscal deficits, as a result of post war recovery and the Vietnam conflict, and fluctuation of inflation rates. Not wanting to take the blame, the executive and legislative branches were content to point the finger in the opposite direction. Unfortunately this finger pointing battle usually ended with the President receiving favorable attention and Congress holding the smoking gun. This was not too surprising since the Congress, as directed by the U.S. Constitution, is in charge of the nation's budget and ultimately responsible. In the early 1970's President Nixon rubbed salt in the wound by publicly attacking Congress for causing the increase in the national deficit, inflation, and unemployment from 1969 through He also attempted to encroach on Congress' "power of the purse" by suggesting the President should decide program cutbacks. In attempting to place the blame for past and current economic ills on Congress and in trying to wrest control of spending decisions away from Congress, the Nixon administration was striking at the fundamental legislative power, the power of the purse, and finding it soft, weak, and vulnerable. 4 4Ibid., 11. 6

17 Congress realized it was in a losing war with the "Imperial Presidency." The executive branch was infringing on Congress' purse power and must be contained. Reforms were needed to check and constrain the executive branches' influence over fiscal policy. 5 The purpose of the Congressional Budget Act of 1974 was to restore to Congress control over governmental spending. Because of the new legislation, Congress was forced to clt serious about budgetary matters. In the past they were content to voice their objection to the executive branch for infringing on their responsibility, however, now that they had won the fight they were confronted with the reality of actually performing the job. The legislation required Congress to adopt two budget resolutions each year which would coordinate taxing and spending policies by including recommended levels of revenues and expenditures. They were also tasked with establishing priorities for spending among nineteen functional areas. Congress realized the necessity to "get smart" on budgetary matters. Therefore, the Congressional Budget Act lead to the establishment of the Congressional Budget Office 5 The executive branch actually began accumulating their influence in the early 20th century when Congress began to encounter difficulties in handling the budget. These difficulties were caused by complications in the budget as the country developed and became more complex. This lead to the Budget and Accounting Act of 1920, which was an attempt by Congress to place the burden of developing a budget on its primary user, the executive branch. 7

18 (CBO). Congress recognized they lacked the expertise needed regarding the economy and budget. In the past they relied on the executive branch, particularly the Office of Management and Budget (OMB), to furnish the necessary information. The CBO was tasked with collecting data regarding the economy and budget solely for the use of Congress. The CBO would also serve to checkmate the OMB, it's counterpart in the executive branch. In addition each house created its own budget committee, which would recommend the budget resolution to the whole body and would employ a sizable professional staff. The Office of Technical Assessment (OTA) was another specialized office organized to judge whether particular issues, primarily defense and energy related, are feasible and warrant further consideration. A side benefit of this major reform has been the renewed interest and extra emphasis placed on the budget by Congress. The responsibility for the United States budget rests with the Congress! The blame can be placed with no other department of government. There are some uninformed members of the mass public who still believe the President is responsible for governmental spending, and therefore, the poor fiscal condition of the country. During August and September, President Bush launched an offensive against Congress, particularly its Democratic leadership, to inform the American people of Congress' rightful responsibility for the budget. The President 8

19 recognized that due to the effect mandatory Gramm-Rudman- Hollings budget cuts would have on the livelihood of many Americans, which were to automatically begin October 1, the public should know the right direction to point their finger. 2. Civilian Control Over Defense The essence of policy making is budget making. The policy programs and goals of administrations must be funded to be placed into operation. budget determines strategy. Therefore, it can be said: As all citizens of this great capitalistic society know, money is power. The person who controls the money controls the power, and as we have discussed in the United States the civilian Congress controls the money. Ferdinand Eberstadt stated: The budget is one of the most effective, if not the strongest, implements of civilian control over the military establishment. 6 From a military perspective this is all too true, however, there are those who feel it is a necessary check of our governmental system. Robert McNamara, Secretary of Defense for the Kennedy and Johnson administrations, was one who strongly advocated the necessity of civilian control of the military. General Curtis E. 'emay was probably McNamara's strongest antithesis as Chief of Staff of the Air Force during McNamara's term. 6 Quoted in Arnold Kanter, Defense Politics: A Budgetary Perspective (Chicago: The University of Chicago Press, 1979), 6. 9

20 McNamara did not believe the civilian control of the armed forces was necessary due to constitutional reasons. He actually believed the military and its leaders were somewhat incapable of making the proper decisions concerning defense, primarily because he felt they would always tend to be biased in their decisions. He strongly felt the military leaders' solution to international problems, or domestic issues such as the budget, would always result in a solution to strengthen the military through an enhancement of their position, or further justification for their existence. His reluctance to solicit and utilize the advice and recommendations of the military was the reason McNamara was contested most by LeMay. Speaking on this subject LeMay wrote: I AM well aware that political considerations can, do, and must transcend military ones when formulating national policy.... My quarrel is with those who usurp the military professional's position--those who step in front of him and who volunteer and enforce strictly military advice and guidance with little knowledge of or experience in such matters. These are the men who have endangered America.... As soon as a man in uniform questions the competence of any civilian to make military judgements, he is charged out of hand with questioning the virtue of civilian control of the military. This is an unfair charge. 7 Throughout both LeMay's and McNamara's careers in Washington there existed an ambience of disparity between the two due to philosophical differences in defense strategies. As General LeMay was the Chief of Staff of the Air Force, this 7 Curtis E. LeMay, America Is in Danqer (New York: Funk & Wagnalls, 1968), 1 (emphasis in original). 10

21 friction was between one of the top military officers in the country, and the top civilian executive of the Department of Defense (DoD). Of course, McNamara prevailed in all major disagreements. This example points out an important element in the complicated defense budget formulation process. As civilian administrations and their associated structure and policies change, so changes defense structure and policies by virtue of their hierarchy over the military. The Kennedy-Johnson era presents a good example. Prior to President Kennedy, the Eisenhower administration was criticized for it's failure to utilize the budget system and achieve a coordinated defense structure. Their defense budget was concerned with arbitrary ceilings in spending for each of the services without much thought of how the spending related to defense strategy and weapon systems. Eisenhower was more concerned with how much money was spent, rather than for what it bought. As a result each of the services had their own priorities for spending, attempting to prove the necessity of their respective department as the primary tool for national defense, and in this particular period, deterrence as well. In many instances weapon systems were being developed by all services which were similar in design and purpose, but only designed for different modes of employment. The Kennedy administration recognized the previous administration's wasteful practices of defense spending and 11

22 vowed to take a more economical approach. President Kennedy did not intend to cut back on the defense budget. Quite the contrary, he only wished to ensure the money allocated was being spent wisely. In his last State of the Union message to Congress, Kennedy stated: This country, therefore, continues to require the best defense in the world--a defense which is suited to the sixties. This means, unfortunately, a rising defense budget--for there is no substitute for adequate defense, and no "bargain basement" way of achieving it.... For threats of massive retaliation may not deter piecemeal aggression--and a line of destroyers in a quarantine, or a division of w~lj-equipped men on a border, may be more useful. to our real security than the multiplication of awesome weapons beyond all rational need.... While we shall never weary in the defense of freedom, neither shall we abandon the pursuit of peace. 8 An example of how changes in the decision-making process or administration will produce changes in policy can be found in the Kennedy administration. Kennedy selected Robert McNamara for the job of shaping up and stream-lining the defense budget. At the time of his selection as Secretary of Defense, Robert McNamara was President of Ford Motor Company, and prior to World War II he had taught at the Harvard School of Business Administration. He had an impressive business background. To accomplish the task before him he developed the "Planning-Programming-Budgeting System," or PPBS. The PPBS was designed to first identify the requirements for defense 8 John F. Kennedy, The State of the Union Messages of the Presidents: , Volume III (New York: Chelsea House Publishers, 1967),

23 strategy, and then ensure the defense system as a whole was organized to meet those requirements. PPBS assumed: " forces should be structured by tasks, not organizational interests; " costs should be measured in relation to benefits; " alternative methods of accomplishing objectives should be capable of evaluation; " short-term planning should reflect long-term goals; " the Secretary of Defense should have the capacity (and the staff) to make such judgements independently of the individual services. 9 Simplified, PPBS was intended to eliminate the wasteful spending practices of the previous administration, while at the same time producing a more economically credible defense force. There were to be no more predetermined budget limits. Decisions were to be made concerning defense programs rather than budgets. The system was designed to eliminate the duplication of similar weapon systems among the services. The original concept developed by McNamara was very good, however, because of the inconsistencies within the operating styles of administrations over the years, the original aspirations of PPBS have not been realized (the PPBS system will be discussed further in chapter two). The budget process is a powerful force capable of exercising considerable influence on the U.S.' national 9john Lewis Gaddis, Strateuies of Containment (New York: Oxford University Press, 1982),

24 security posture. To fully understand its importance and influence within the international system, one should examine the role of economics within the future international environment. B. THE FUTURE INTERNATIONAL ENVIRONMENT The future international environment is one of great speculation and concern to all social scientists and students of the field. The future structure will be more complex and interconnected than in the past. Countries will tend to concentrate more on international trade issues and the status of their balance of payments. They will monitor the value of foreign currencies and markets around the world, apprehensive of possible implications at home. The complexity of this interconnection will not only revolve around economic issues, but also around a concern for the world's future. As we progress into the final years of the twentieth century, nations are becoming more aware of their shared interests and dependence in the areas of ecology, technology and other sciences. This growing interdependence between states will continue to have a profound affect on the division of power. A nation's interdependence upon other nations is an important component in determining its strength in times of crisis, and tends to weaken the country, making it vulnerable to 14

25 manipulation by the powers of the world. According to Robert 0. Keohane and Joseph S. Nye:. interdependence restricts autonomy, but it is impossible to specify a priori whether the benefits of a relationship will exceed the costs. This will depend on the values of the actors as well as on the nature of the relationship. 10 Richard Rosecrance and Arthur Stein view interdependence in a much more basic sense: a relationship of interests such that if one nation's position changes, other states will be affected by that change. 1 In the future, the concept of interdependence will bring to mind ideas of mutual survival and new technological discoveries around the globe. Caution must be exercised by the world leadership to protect the delicate stability that will accompany this seemingly utopian environment. The increase in interdependence throughout the system will inevitably produce the potential for more volatility. It is only natural for this to occur, as nations reluctantly release part of their sovereignty as they open their doors to outside influences. This openness relinquishes control of certain domestic affairs which, in turn, affects the control over their own internal stability. The natural tendency of government is to resist 10 Quoted in James E. Dougherty and Robert L. Pfaltzgraff, Contending Theories of International Relations (New York: Harper & Row, 1981), 136. "Ibid,

26 such change, which is why the transformation process will not happen immediately. In the future, interdependence will play a more predominant role throughout the international structure than any other period in history. The world will be more educated in terms of economic and technological cooperation, a realization of our coexistence in the same environment, and in respect to an awareness of our capability to destroy everything we hold precious. The international system, in effect, is transforming from an "actor" to a "systems" oriented structure. A bi-product of this new international paradigm will be a restructuring of the decision-making process throughout government. As Charles William Maynes, editor of ForeiQn Policy magazine, recently wrote: the task of government is changing, and so must the people chosen to head it. The challenge is now less military vigilance than diplomatic change. Economists will be more important than geopoliticians, diplomats more critical than warriors. Multilateralists for the first time will be more important than bilateralists - people who understand international financial institutions may be more valuable than people who know the names of Salvadoran guerrilla leaders. Experts in fields like the Pnvironment or development may become serious candidates for major positions on the N.S.C. or in the State Department Charles William Maynes, "For New Foreign Policy... The New York Times, 23 May 1990, A17. 16

27 Unlike the immediate postwar period, governmental leadership today is cognizant of the present stalemate that exists with nuclear deterrence. They are beginning to mutually agree on the futility of this standoff and the horrible consequences to our shared environment if these weapons are ever put to use. In this sense, interdependence relates to a concerted effort on the part of both superpowers and the remainder of the industrialized world to protect our only source of life: planet Earth. If the stability and rationality of the international system is maintained, the nuclear standoff and arms control negotiations will become less predominant an issue in summit discussions. Evidence of such a shift can already be noticed. Prior to the summit last May between Presidents Bush and Gorbachev in Washington D.C., some concern was raised over the agenda for the discussions. As Robert C. Toth of the Los AnQeles Times wrote: As the superpowers prepare to consider a nuclear weapons treaty and a pact to cut conventional forces in Europe, critics are questioning whether what is on the table is very meaningful - or even necessary - any more. With the Soviet bloc disintegrating, and Moscow already pulling its troops out of Eastern Europe on its own, the arms control negotiations are being overtaken by events Robert C. Toth, "As Cold War thaws, critics question need for arms pact," San Jose Mercury News, 28 May 1990, 18A. 17

28 The discussions will invariably expand to include other critical issues which are shared by the superpowers and the world community. However, if the stability of the international system breaks down, there is a very real possibility of a shift back to a tight bi-polar system similar to the postwar era. As we progress further into the future, the possibility of this scenario becomes less likely. Many would argue, however, that the stability of the world has been successfully maintained over the years because of the nuclear standoff. These people would argue that as the world shifts into a more horizontal diffusion of power and multi-polar blocs, the environment will become more unstable. The potential for increased instability is present, however, the real potential threat to world stability lies not between the U.S. and Soviet Union in the near term, but rather within regional disputes which may arise, such as Iraq's invasion of Kuwait. The decreased emphasis over concern of a future nuclear conflict contributes to the predominant element of national power in the future international system: economic power. Economic power will be the primary determinant of a nation's hierarchial pocition in the system, and the multi-polar structure which will develop in the decade of the '90's. The multi-polar environment will become increasingly centered around the economic relationships between countries and communities of countries, such as the European Economic 18

29 Community (EEC), the Organization of Petroleum Exporting Countries (OPEC), and the Association of Southeast Asian Nations (ASEAN), just to name a few. The environment will continue to shift from a position of "every nation for himself," to a more cooperative dependence among the nations, both in terms of economic relationships and ecological considerations. This expanding economic interaction may be deceiving in terms of its benefits to the world in general, and especially to U.S. national security. This predominant economic system of international trade will further bind the world together in an intricate collection of interdependencies between countries. An analysis of international economics is, therefore, an analysis of world power, and directly affects the manner in which nations interact with one another. Paul Kennedy maintained this proposition with a historical comparison which examined the relationship between national power and a state's economic well-being. 14 Today, more than ever, the subject of economics is in the forefront of international discussions, negotiations and agreements, and will only continue to increase in importance in the '90's. In the present age where economic interdependence is developing into a complex array of intricate trade agreements, treaties and sanctions; which are closely monitored by 14 See Paul Kennedy, The Rise and Fall of the Great Powers (New York: Random House, 1987; Vintage Books, 1989). 19

30 individual governments, multinational firms and international investors; regional economic fluctuations now produce significant repercussions around the world. The United States' economy will certainly play a large part in the delicate balance of the current world market, and its economic well-being will further determine the U.S.' future degree of influence as this economic system continues to develop. An understanding of these delicate relationships is imperative! C. THE FUTURE THREAT TO U.S. NATIONAL SECURITY ASSOCIATED WITH THE BUDGET-MAKING PROCESS The heart of policy making is the budget. As Robert McNamara stated: : policy decisions must sooner or later be expressed in the form of budget decisions on where to spend and how much. 15 As administrations change so do their ideas concerning the preeminence of policies. Even changes in administrations of the same political party will have differences in their views toward certain policies and programs. The more emphasis an administration places on a particular policy issue the more emphasis will be placed on ensuring it receives the necessary funding. A strong defense budget is a signal to foreign countries, both allies and adversaries, of the U.S.' commitment to remain 15 Quoted in Kanter, 5. 20

31 strong militarily. It is the necessary backing to indicate the intent of the U.S. to keep their promise of protection to key allies and the rest of the free world. In February 1982 President Reagan was asked, "Why are you so strong in your support of this additional [military] spending?" The President replied: In the last several years before this administration, the military was literally starved. There is a dangerous window of vulnerability. Even with our military buildup, we will not even be back in the range of ability to stand in the face of our adversaries, the Soviet Union, until the mid-eighties.... But we have to show our adversaries that we have the will to defend ourselves. They have thought for several years we don't. 16 As pressure grows to reduce the fiscal deficit, the greater the likelihood many politicians will opt for shortterm "quick-fixes," rather than long-term solutions to the problems at hand. The end result of these domestic political decisions will impact the U.S. defense posture as the political pressure grows to cut defense spending and realize a "peace dividend." Although the pressure has recently become less conspicuous as a result of the Middle East crisis, there remains a considerable urgency to repair the U.S.' poor fiscal 16 President Reagan was interviewed by Skip Weber of the Iowa Daily Press Association in Des Moines, February 9, Transcripts found in Public Papers of the Presidents of the United States: Ronald Reagan, 1982, Volume I (Washington D.C.: U.S. Government Printing Office, 1983),

32 CLAIMS ON FUTURE RESOURCES (or The Budget's Hidden PACMEN) * RISING HEALTH CARE COSTS * RISING MANDATORY PROGRAM COSTS * UNFUNDED RETIREMENT PROGRAM LIABILITIES * RISING CLEAN UP COSTS * RISK OF FUTURE CLAIMS FROM: - FEDERAL CREDIT PROGRAMS - FEDERAL INSURANCE PROGRAMS PEACE DIVIDEND??? Figure 1 condition. As Figure 117 illustrates, the "peace dividend" many Americans hope for will quickly be absorbed by demands from other sectors of the economy, and likely will never be realized in terms of its affect on the federal deficit. Nonetheless, the problem facing the DoD and Congress is the determination of what, and how much, should be cut from the total U.S. budget. It is no longer a question of whether 17 Donald E. Gessaman, Acting Deputy Associate Director for National Security, Office of Management and Budget, Executive Office of the President, interviewed by author, 23 October 1990, Washington D.C. 22

33 or not the cuts will be made, at this point they are inevitable. The danger to U.S. national security lies not within the specific requirement to reduce government expenditures, but rather in the irrational implementation of that requirement in order to appease the American public, without the proper long-range consideration of their implication to future U.S. defense strategy. Therefore, it is critical at this point that the U.S. research methods for cutting back on defense spending, while at the same time preserving an adequate level of defense. An important variable which will influence the tough decisions on what must be cut from the budget will be, of course, "pork-barrel" politics. Many Congressmen are quick to support the outcry for a reduced defense budget, however, the same are also vigilant to protect the interests of their constituents. A good example was the proposed list of military base closures submitted to Congress earlier this year. Many Congressional members quickly took the defensive "not in my district" attitude. This traditional "porkbarrel" political posture poses the most serious threat to U.S. national security, because it tends to force the politician to think in terms of "what's good for the district" or "home state," rather than on "what's good for the nation." At a time where drastic defense reductions appear imminent, the decisions to be made concerning what to keep and what not to keep, must be unbiased and intelligent. It would 23

34 seem the most unbiased decisions could only come from the department of government not concerned over being reelected: the Department of Defense. Naturally, the Congress, who ultimately holds the constitutional "power of the purse," is reluctant to release control of such authority, especially since that control would fall into the hands of the executive branch and DoD. 18 DoD should not be granted carte blanche with respect to defense spending, however, a more objective process will be required to properly decide on a long-range defense strategy, and the associated budget necessary to achieve it. 18 The Congress can be credited today with making greater attemptc to include the Department of Defense, and more importantly the military, in national security decisions, an example being the Goldwater-Nichols Act of

35 II. THE PROBLEMS ASSOCIATED WITH THE CURRENT BUDGET PROCESS The United States is faced with a dilemma! That perplexity is how to arrive at a consensus among the Congress to repair the ailing fiscal health of the nation. As the nation grows older, its capability to work cooperatively for a common goal seems to deteriorate. It may be argued at times that this partisanship which exists in the governmental system is dysfunctional. However, it can also be argued quite assertively that it serves a vital role in strengthening our pluralistic democracy. Today partisan politics is clouding the vision of the elected officials in Washington, which prevents them from taking action for the greater good of the nation. The concept of making compromises has become an unthinkable proposition among the legislators. This unwillingness to accept resolutions for the overall benefit of a package, due to particular concessions which go against personal or party principles, impedes the enactment of legislation the nation needs to properly conduct business. It is a weakness of the government's solidarity, which contributes to a weakness in its national security. This weakness became all too evident during the budget crisis last October. As fiscal year 1990 drew to an end, Congress was once again confronted with the deadline of 25

36 October ist without much promise of an acceptable resolution for the budget. Once again, the people's representatives could not agree on the fiscal requirements necessary to steer the economy in the direction for a future balanced budget, while simultaneously achieving their own personal economic objectives and protecting their bid for reelection in November. Recognizing the familiar paradigm surfacing from capital hill, the president sought to prevent the redundant pattern from occurring, which habitually results in a temporary solution to an aging problem. The president launched a verbal offensive, and reprimanded Congress for not performing its constitutional duty in a timely manner. At a news conference on August 14th, President Bush stated: Our current budget or lack thereof constitutes a real threat to the economic well-being of this country. And in this case the problem is a lack of action on the part of the Congress, and abdication of responsibility that endangers our economic vitality and the jobs that go with it. It is no secret to the American people that the Congressional budget process has broken down. 19 The President was seeking a permanent solution to the economic problem before the nation, rather than a temporary resolution that would only postpone significant action into the new fiscal year. Congress requires the executive branch to submit its federal budget proposal on time each year, the 19 "Bush News Conference On Budget and Middle East," The New York Times, 15 August 1990, All (N). 26

37 Table I BUDGET PROCESS TIMETABLE January President submits budget to Congress. February 15 CBO issues annual report to Budget Committees. February 25 April 15 June 15 Committees submit views and estimates to Budget Committees. Congress completes first concurrent budget resolution. Congress completes reconciliation process. June 30 House completes action on annual appropriations bills. August 15 August 20 August 25 OMB and CBO estimate deficit for upcoming fiscal year. CBO issues its initial report to OMB and Congress. OMB issues its initial report to President and Congress. President issues initial sequester order. September 15 Congress completes second concurrent budget resolution. September 25 Congress completes second and final reconciliation process. October 1 October 10 October 15 Fiscal year begins. CBO submits revised report to OMB and Congress. OMB issues its revised report to President and Congress. President issues final sequester order. Source: "'The Budget Process," ConQressional Digest (November 1989): ; and Lee D. Olvey, et al., The Economics of National Security. 27

38 first monday after January 3rd (see Table I), and the executive branch consistently meets this deadline. Congress should approve the federal budget within the same time constraints. Once again as the deadline approached, Congress could not agree on a meaningful solution, and passed a continuing budget resolution that would temporarily keep the government running for another week. Steven Mufson and John E. Yang, of the Washington Post, wrote of the problem: The resounding defeat of the deficit-reduction accord in the House... raises two questions: Can any package big enough to deal with the deficit problem pass Congress, and will anything that passes Congress be big enough to deal with the problem? 2 The president exercised his right of veto over the continuing resolution in order to emphasize, both to Congress and the American people, the importance of the positive measures needed toward a reduction in the budget deficit and control over fiscal policy. This action sent a clear signal to the representatives that the administration was intolerant of further postponement of the real problem before them: the repair of the nation's economy. The inability of Congress to reach a consensus when dealing with national problems, such as choosing the correct action to solve the U.S.' economic and budgetary ills, has 20 Steven Mufson and John E. Yang, "As crises go, the U.S. deficit just isn't sexy," San Jose Mercury News, 7 October 1990, 1A. 28

39 been the subject of a number of different publications, and the focus of research by a number of social scientists over the years. 21 The research of particular interest and relevant to this discussion is the studies which looked into the effective operability of group decision-making, more specifically, its relationship to, and implications upon, a democratic governmental system. The next few paragraphs will focus attention on the particular work accomplished by Kenneth J. Arrow. Arrow addressed the difficulties in the establishment of assimilation procedures for the various preferences of a particular group's members. Basically, his research and conclusions outlined the difficulties similar to those encountered within the U.S. Congress, as 435 representatives and 100 Senators try to represent the desires of their respective constituents and, simultaneously, reach an agreement on a particular piece of legislation. His procedure was to come up with some logical criteria by which social decisions were made, and then to examine their implications within the process. As stated by William J. Baumol, Arrow originally proposed the following four minimal conditions which social choices must meet in order to reflect individuals' preferences: 21 See Dennis C. Mueller, Public Choice II, rev. ed. (Cambridge: Cambridge University Press, 1989). 29

40 social choices must be consistent (transitive) in the sense that if A will be decided in preference to B, and B in preference to C, then C will not be decided in preference to A; " the group decisions must not be dictated by anyone outside the community or by any one individual in the community; " social choices must not change in the opposite direction from the choices of the members of that society; that is, an alternative which would otherwise have been chosen by society must never be rejected just because some individuals come to regard it more favorably; and " a social decision as between two alternatives must not change so long as no individual in the community changes the order in which he ranks these alternatives in accord with his preferences. In other words, the social preference as between two alternatives, A and B, must depend only on people's opinions of just these twc alternatives, A and B (and not on any other alternative which does not happen to be immediately relevant). 22 Arrow's intent was to illustrate that although the above criteria appear to be a typical set of characteristics which would represent or define a democratic process, the interaction of the principles offer a much more complicated process. He demonstrated that it is impossible tc successfully choose between all the desires of a particular social group without violating at least one of the above criteria. William J. Baumol illustrated Arrow's concept through the use of the three diagrams shown in Figure 2. Three individual's (Smith, Jones, and Mznch) are to choose between 22 William J. Baumol, Economic Theory and Operations Analysis, 3d ed. (Englewood Cliffs, New Jersey: Prentice- Hall, 1972),